1. PENSIONS FORUM
23 FEB 2010

2. EQUITY MARKETS

3. FUND VALUE

4. How extreme are current conditions?
Median
1 in 20
chance
1 in 100
Funding levels within range modelled
Source: Hymans Robertson comPASS system

5. Long Term Longevity Assets Liabilities Different Employing Bodies
VALUATION 2010
Long Term
Longevity
Assets
Liabilities
Different Employing Bodies

6. Profile of emerging expenditure
Funded schemes like LGPS have investment income too
Source: sample LGPS Fund; new entrants for 50 years

7. Contributions alone cover benefit payments for 12 years or more
but picture different for individual employers

8. Two years of improvement per decade
Period expectations of life derived from calculated crude mortality rates.
Source: Club VITA LLP, part of the Hymans Robertson group

9. Vita’s lifestyle effect (postcode based)
High life expectancy
Mid life expectancy
Low life expectancy
PH1 2AF
PH1 2AE
Source: Club Vita research based on VitaBank as at 2 October 2008 9

10. Vita’s lifestyle effect (postcode based)
High life expectancy
Mid life expectancy
Low life expectancy
PH1 2AF
PH1 2AE
Source: Club Vita research based on VitaBank as at 2 October 2008 10

11. What has changed since 2007 Negatives Investment experience since 2007
Government bond yields lower (inflation linked)
Higher inflation expected over the long term
Expectation of future improvements in life expectancy
Positives
Pay increases may be lower than assumed?
Cost sharing or “cap and share”?? LT 11

12. Funding level (solvency) since last valuation
Assets
Liabilities
Funding Level

13. Progress of employer contribution rate since 31 March 200713 13 13 13

14. VALUATION 2010 6 year Stabilisation
for strong covenant remains in place
Doesn’t cover Contractors, HA’s other smaller bodies

15. Other employers including contractors and CABS
Possible Options;
Seek stronger backing
- guarantee
- additional security
Current Contracts difficult - Actuary willing to assess risk
New Contracts may need to limit risk e.g.
pass back 15

16. CLG financing plan for 2010 valuations
Achieve stability for long term, secure employers
Test contribution strategy meets long-term funding objective
Generate cashflows for future benefit expenditure
Risk assessment
Staffordshire Pension Fund has been
doing all of this since 2007

17. VALUATION 2010 Large funding deficit Longevity – Club Vita
Potential LARGE increase in contribution rates for contractors, CAB’s etc.
6 year stabilisation deal OK but reviewed going forward
All – relies on accurate data

18. Tenders out for; Actuary Investment Consultant Performance Measurer
FUND CHANGES
Tenders out for;
Actuary
Investment Consultant
Performance Measurer

19. FUND CHANGES Move balance from UK to overseas (now 40:60)
Move from Regional to Global managers
Move bond mandate to Corporate bond only – passive gilts exposure

20. 5 new global managers Aberdeen Bankinvest J P Morgan Longview Sarasin
FUND CHANGES
5 new global managers
Aberdeen
Bankinvest
J P Morgan
Longview
Sarasin

21. FUND ALLOCATION Target Actual Equity 74% 74.5% Bonds 13% 12.9%
Property 10% %
Hedge 2% %
Cash 1% %

22. REGULATIONS UPDATE Management of cash – separate bank account
Explicit power to borrow
Policy on stock lending
Compliance with Myners –
Gov guidance?
Further consideration to prudential approach ‘in due course’